fighting global corruption by @ericpesik
DESCRIPTION
Fighting global corruption by building sustainable corruption risk assessment process and developing a proactive risk management plan proportional to your organization’s risk exposure. Presented by Eric Pesik at Asia Risk Professionals Congress at the Carlton Hotel, in Singapore, March 2012TRANSCRIPT
Fighting Global Corruption
Presented by Eric Pesik Asia Risk Professionals Congress
Carlton Hotel, Singapore, 2012
Fighting global corruption by building sustainable corruption risk assessment process and developing a proactive risk management plan proportional to your organization’s risk exposure
Fighting Global Corruption
Agenda: 1. New Anti-Corruption Laws 2. Risk Assessment Process 3. Risk Management Plan 4. Responsibility of Risk Officers
Agenda: 1. New Anti-Corruption Laws 2. Risk Assessment Process 3. Risk Management Plan 4. Responsibility of Risk Officers
Anti-Corruption Laws
US Foreign Corrupt Practice Act (FCPA)
UK Bribery Act
China Anti-Bribery Amendments
Commercial Bribery
Bribery of Government Officials
Dodd-Frank Whistleblower
Global Reach
Every Country Prohibits Bribery
Agenda: 1. New Anti-Corruption Laws 2. Risk Assessment Process 3. Risk Management Plan 4. Responsibility of Risk Officers
FCPA Fines in Millions
$82
$137
$149
$185
$219
$338
$365
$400
$579
$800
Panalpina (Switzerland)
Alcatel-Lucent (France)
Jeffrey Tessler (UK)
Daimler AG (Germany)
JGC Corporation (Japan)
Technip (France)
Snamprogetti/ENI (Holland/Italy)
BAE (UK)
KBR/Halliburton (USA)
Siemens (Germany)
Only US company
Average age of persons currently in US prisons
for FCPA convictions
58
Aaron G. Murphey, Foreign Corrupt Practices Act: A Practical Resource for Managers and Executives, 2001 John Wiley & Sons, Inc.
Financial Statement Fraud
11%
68%
21%
Value of All Losses (Occupational Frauds by Category)
May exceed 100% because cases involve multiple categories. Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study
Asset Misappropriation
Corruption
33%
5%
86%
May exceed 100% because cases involve multiple categories. Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study
Financial Statement Fraud
Asset Misappropriation
Corruption
Frequency of All Losses (Occupational Frauds by Category)
Balancing Proportionality
Risk by Geography
Transparency International 2010 Corruption Perceptions Index
Risk by Industry
Each industry is different
Risk by Customers
Risk by Intermediaries
Intermediaries increase risk
Risk by Company
Risk by Constituents
Corruption Risk
Likelihood & Impact Scale
Risk Inventory
Personal Commitment
Form
Likelihood Rating Scale
Unlikely Likely Almost Certain
Frequency: Not more
than every 3 years
One every 1-3 years
More than once per
year
Probability: 10% - 30% 30% - 60% > 60%
Impact/Severity Rating Scale Minor Moderate Major
Financial Impact:
< $1 Million $1-5 Million > $5 Million
Reputational Impact:
Pub Awareness Pub Concern Govt. / Official Investigation
Regional State / National International Internal Shareholders Public Markets
Operational Impact:
Little or no Impact
Business Unit or Function
Company Operations
Asking for Reassurances
Doubting Business
Canceling Business
Individuals Disciplined
Individuals Terminated
Criminal Sanctions
Employee Morale
Employee Turnover
Loss of Mgrs/Execs
Risk Inventory
1. Political Contributions/Activities 2. Charitable and Industrial Contributions 3. Company Memberships 4. Expense Accounts 5. Consultants and Professional Service
Providers 6. Leadership 7. Company Culture 8. Accurate Books and Records 9. Expense Accounts 10.Acquisitions 11.Business Combinations 12.Third Party Representatives and Agents 13.Procurement 14.Gifts, Gratuities, and Entertainment 15.Export, Import, Customs
Likelihood &
Magnitude
Cost-benefit analysis
Cost of Avoidance
Low Likelihood Low Impact
High Likelihood High Impact
Low Likelihood High Impact
High Likelihood Low Impact
Low Likelihood High Likelihood
Low Im
pact
Hig
h Imp
act
Low Likelihood Low Impact
High Likelihood High Impact
Low Likelihood High Impact
High Likelihood Low Impact
Low Likelihood High Likelihood
Low Im
pact
Hig
h Imp
act
Add Cost to Avoid or Mitigate
Agenda: 1. New Anti-Corruption Laws 2. Risk Assessment Process 3. Risk Management Plan 4. Responsibility of Risk Officers
Likelihood & Impact Scale
Risk Inventory
Personal Commitment
Form
Low Likelihood Low Impact
High Likelihood High Impact
Low Likelihood High Impact
High Likelihood Low Impact
Low Likelihood High Likelihood
Low Im
pact
Hig
h Imp
act
Low Likelihood Low Impact
High Likelihood High Impact
Low Likelihood High Impact
High Likelihood Low Impact
Low Likelihood High Likelihood
Low Im
pact
Hig
h Imp
act
Low Likelihood Low Impact
High Likelihood High Impact
Low Likelihood High Impact
High Likelihood Low Impact
Low Likelihood High Likelihood
Low Im
pact
Hig
h Imp
act
Low Likelihood Low Impact
High Likelihood High Impact
Low Likelihood High Impact
High Likelihood Low Impact
Low Likelihood High Likelihood
Low Im
pact
Hig
h Imp
act
Low Likelihood Low Impact
High Likelihood High Impact
Low Likelihood High Impact
High Likelihood Low Impact
Low Likelihood High Likelihood
Low Im
pact
Hig
h Imp
act
Likelihood & Impact Scale
Risk Inventory
Personal Commitment
Form
Likelihood & Impact Scale
Risk Inventory
Personal Commitment
Form
Risk Management Plan
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Example: Anonymous
Tip Line
0.8%
1.0%
1.8%
2.6%
4.6%
5.2%
6.1%
8.3%
13.9%
15.4%
40.2%
IT Controls
Confession
Notified by Police
Surveillance/Monitoring
External Audit
Document Examination
Account Reconciliation
By Accident
Internal Audit
Management Review
Tip
Fraud Detection
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study
0.8%
1.0%
1.8%
2.6%
4.6%
5.2%
6.1%
8.3%
13.9%
15.4%
40.2%
47.1%
IT Controls
Confession
Notified by Police
Surveillance/Monitoring
External Audit
Document Examination
Account Reconciliation
By Accident
Internal Audit
Management Review
Tip
Tip With Hotline
Fraud Detection
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study
0.8%
1.0%
1.8%
2.6%
4.6%
5.2%
6.1%
8.3%
13.9%
15.4%
40.2%
33.8%
IT Controls
Confession
Notified by Police
Surveillance/Monitoring
External Audit
Document Examination
Account Reconciliation
By Accident
Internal Audit
Management Review
Tip
Tip Without Hotline
Fraud Detection
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study
0.8%
1.0%
1.8%
2.6%
4.6%
5.2%
6.1%
8.3%
13.9%
15.4%
40.2%
33.8%
IT Controls
Confession
Notified by Police
Surveillance/Monitoring
External Audit
Document Examination
Account Reconciliation
By Accident
Internal Audit
Management Review
Tip
Tip Without Hotline
Fraud Detection
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study
13.3%
Dodd-Frank Whistleblower
Agenda: 1. New Anti-Corruption Laws 2. Risk Assessment Process 3. Risk Management Plan 4. Responsibility of Risk Officers
Likelihood & Impact Scale
Risk Inventory
Personal Commitment
Form
Risk Management Plan
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Constituency Buy-in
Management Buy-in
Low LikelihoodLow Impact
High LikelihoodHigh Impact
Low LikelihoodHigh Impact
High LikelihoodLow Impact
Low Likelihood High Likelihood
Low Im
pact
Hig
h Imp
act
Risk Management Plan1.2.3.4.5.6.7.8.9.10.
Official Tone From
the Top
don’t get trapped
Fighting Global Corruption
Questions?
All images are from Microsoft Office Online, used with permission from Microsoft, except for the following images licensed under Flickr Creative Commons Attribution License
Businessman behind web By internets_dairy flickr.com/photos/16339684@N00/2784622731/
Parlament by Convergència Democràtica de Catalunya flickr.com/photos/convergenciademocratica/6197445493/
Businessman by Kripptic flickr.com/photos/kripptic/1954828422/
Signpost by Andrea_44 flickr.com/photos/8431398@N04/2680944871/
Meeting nieuwe leden flickr.com/photos/kripptic/1954828422/
Blue Telephone by By UggBoy/UggGirl flickr.com/photos/uggboy/5345135964/
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